An Obligation to Compensate a Patentee for Infringement May Not End When the Patent Expires

April 28, 2017

For the First Time, the Federal Court Awards Payment of Profits Made After Patent Expiry

Written by Dominique T. Hussey, L.E. Trent Horne and Jeilah Y. Chan

An infringer's liability to compensate a patent owner may not end when the patent expires. The Federal Court has made a novel award of "springboard" profits, requiring an infringer to account for profits it made even after the patent's expiry. This award recognizes the time it would have taken to develop a product and ramp up sales had the patent not been infringed.

Case

IP Type

Patents

Summary

The Dow Chemical Company (Dow) successfully sued Nova Chemical Corporation (Nova) for patent infringement. Dow's patent was directed to polyethylene used to make film products like garbage bags and food wrapping. The initial trial was a bifurcated proceeding, meaning only issues of validity and infringement were determined. The parties then had a separate trial on the amount of compensation Nova would be required to pay Dow.

As its patent was valid and infringed, Dow was entitled to receive two separate forms of compensation. The first was a "reasonable royalty" for the period between the date the application was open for public inspection and the date the patent was granted. The Court fixed the royalty at 8.8%.

For the period after the patent was granted, Dow was entitled to choose between two mutually exclusive remedies: payment of damages or payment of Nova's profits. Dow elected profits—an equitable remedy within the discretion of the Court.

The amount of profit to be disgorged is determined by a "but-for" analysis, which considers what the defendant would have done had it not infringed the patent. On the facts, Nova could not have started manufacturing and selling a competing film the day after Dow's patent expired. Rather, Nova would have needed to develop and test its product and further qualify that product for use in specific applications by each of its customers.

Dow successfully argued that by infringing the patent, Nova benefited from a springboard into the market, and continued to profit from its infringing activity even after the expiry of the patent. Nova should therefore remit to Dow its profits during the springboard period, which, based on Nova's historical ramp-up periods, was fixed at 20 months.

The dollar figure associated with the springboard period is unknown, but will be significant. Dow's patent was granted in 2006 and expired in 2014. The springboard period ordered by the Court adds approximately 20% to the period for which profits are to be disgorged.

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